Question 1

Mega Corporation has developed a strategic plan that calls for an emphasis on appealing to a younger demographic. If it decided that such an appeal to a younger market would necessitate a change in the corporate logo and trademark, such changes would require an understanding of:

securities law.

intellectual property law.

contract law.

antitrust law.

Question 2

Secondary sources of law:

are looked to when there is no primary source of law that applies to the facts of a case.

are considered a valid independent authority.

apply to both federal and state legal issues.

have no legally binding effect.

Question 3

The common law is the law that all states follow to avoid confusion and to promote consistency from state to state.

True

False

Question 4

Restatements of the Law are written and revised by Congress and state legislatures as needed.

True

False

Question 5

Legal positivists believe that agreed-upon laws should be uniformly and strictly enforced and may be changed only by the government.

True

False

Question 6

Rich has been arrested for a series of 21 home burglaries that spanned over nine months. The news regarding the crime spree was on television, on radio, and in the newspapers on a regular basis. His lawyer doesn’t believe that Rich can get a fair trial locally, so he will ask for:

a change in personal jurisdiction.

a change in subject matter jurisdiction.

a change in venue.

a change using a long-arm statute.

Question 7

The physical presence of an out-of-state party in a particular state is generally an automatic basis for jurisdiction over the defendant by both that state’s courts and the federal trial court within that state.

True

False

Question 8

A state court may not unilaterally declare or decide that proper venue for a case should be in another state.

True

False

Question 9

State long-arm statutes are used to establish subject matter jurisdiction over out-of-state defendants.

True

False

Question 10

Not all courts have the authority to hear all cases.

True

False

Question 11

While normal arbitration produces an arbiter’s decision and the parties are bound by the award, online arbitration produces a decision but the award is not binding on the parties.

True

False

Question 12

When the American Arbitration Association receives an application for appointment of an arbitrator, it:

meets with a local trial judge to determine whether litigation or arbitration will be most efficient and advantageous based on the parties and the nature of the dispute.

meets with attorneys from both sides to determine whether litigation or arbitration will be most efficient and advantageous based on the parties and the nature of the dispute.

receives a list of suggested arbitrators from both parties and then selects the arbitrator, who informs the parties of the procedures and rules of arbitration.

appoints a tribunal administrator, who informs the parties of the procedures and rules of arbitration.

Question 13

In the typical business context, ADR is invoked either via contract or by mutual agreement.

True

False

Question 14

Depositions are:

oral questions, answered orally, asked of parties and witnesses.

oral questions, answered orally, asked only of parties.

written questions, answered in writing, asked of parties and witnesses.

written questions, answered in writing, asked only of parties.

Question 15

Online dispute resolution (ODR) has all of the advantages of traditional forms of ADR.

True

False

Question 16

The moderate view of assessing corporate citizenship holds that:

corporate officers and boards of directors should provide the exclusive view of corporate responsibility.

corporate employees below the senior executive level should provide the exclusive view of corporate responsibility.

community groups where the corporation is located should provide the exclusive view of corporate responsibility.

the government should provide the exclusive view of corporate responsibility.

Question 17

Modern Corporation operates a steel mill. It has never contributed anything to the local community, and it knowingly pollutes both the air and the river that runs by its mill. The corporation’s reasoning is that the cost of installing pollution control devices would diminish its profits, and it doesn’t support the community because it provides jobs and doesn’t think it owes anything else to the citizens in its area. Donating to the community would also diminish profits. Which theory of corporate social responsibility is Modern Corporation exhibiting?

the narrow view, or invisible hand theory

the moderate view, or government’s hand theory

the hybrid view, or citizen’s hand theory

the broad view, or management’s hand theory

Question 18

A particular act can be deemed unethical yet still be legal.

True

False

Question 19

The triple bottom line in the perspective of corporate social responsibility emphasizes each of the following except:

creation of profit.

creation or destruction of environmental value.

creation of social value.

creation of private value.

Question 20

The reputed mastermind of the Enron business model was:

Kenneth Lay, founder and chief executive officer.

Jeffrey Skilling, chief operating officer.

Andrew Fastow, chief financial officer.

Rick Clausey, chief accounting officer.

Question 21

Zoning is generally done at the state level through statutes passed by the state legislature.

True

False

Question 22

A sublease occurs when a tenant transfers the entire remaining term of a lease to a third party.

True

False

Question 23

The Takings Clause is found in the Constitution’s:

First Amendment.

Fifth Amendment.

Eighth Amendment.

Fourteenth Amendment.

Question 24

Penny is renting an apartment from Albert. Every time Penny flushes the toilet, the toilet overflows and she must clean and mop the floor of her bathroom. She has complained numerous times, but Albert will not fix the problem. Albert is breaching Penny’s right to:

habitability.

quiet enjoyment.

possession.

fair use.

Question 25

Company A and company B own adjacent pieces of land. The companies own the full bundle of rights in their respective properties. Company A digs a mine that starts on its own property but extends, below ground, across the property line. If company A finds minerals below company B’s surface property, it may mine and use the minerals for its own use because it has not gone onto or disturbed company B’s property.

True

False

Why is the knowledge of accounting concepts and terminology useful to anyone in a business activity?
Is there a difference between bookkeeping and accounting? Discuss.
Accounting reports past performance. How can this be useful when planning future operations?

Pearson Brothers recently reported an EBITDA of $7.5 Million and net income of $1.8 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?

2-7 – (Corporate Tax Liability)

The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charge of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes. What are the company’s marginal and average tax rates on taxable income?

Chapter 3 Problem

3-8 – (Profit Margin and Debt Ratio)

Assume you are given the following relationships for the Clayton Corporation: Sales/total assets 1.5 Return on assets (ROA) 3% Return on equity (ROE) 5% Calculate Clayton’s profit margin and debt ratio.

3-10 – (Times-interest-earned ratio)

The Manor Corporation has $500,000 of debt outstanding, and it pays an interest rate of 10% annually: Manor’s annual sales are $2 million, its average tax rate is 30%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan and bankruptcy will result. What is Manor’s TIE ratio?

Chapter 12 Problem

12.1 – (AFN Equation)

Baxter Video Product’s sales are expected to increase by 20% from $5 million in 2010 to $6 million in 2011. Its assets totaled $3 million at the end of 2010. Baxter is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2010, current liabilities were$1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter’s additional funds needed for the coming year.

12-4 – (Sales Increase)

Bannister Legal Services generated $2,000,000 in sales during 2010, and its year-end total assets were $1,500,000. Also, at year-end 2010, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accruals. Looking ahead to 2011, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5%, and its payout ratio will be 60%. How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate?